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Avnet Plans $40 Million In Cuts After Q3 Net Income Plunges

The Phoenix-based distributor's net income has dropped nearly in half, leading to a new round of cuts. But the company nonetheless gets kudos for its work in cloud computing.

The company posted third-quarter net income of $86.2 million compared to $147.6 million during the year-ago quarter. Earnings per share were down 12.6 percent year-over-year, at 90 cents. Sales were essentially flat year-over-year at $6.3 billion. Pro forma revenue declined 4.8 percent year-over-year.

"On a regional basis, both operating groups experienced year-over-year organic revenue declines in the higher-margin western regions for the fifth consecutive quarter," said CEO Rick Hamada, in a prepared statement. "Strongly influenced by this, our adjusted operating income margin declined 65 basis points year-over-year and adjusted earnings per share declined 12.6 percent. As a result, we are continuing to drive actions for margin improvement, including new annualized cost reductions of approximately $40 million that are expected to be completed by the end of our fourth fiscal quarter. This will now bring our cumulative cost reductions in fiscal 2013 to approximately $140 million."

[Related: Avnet Posts Flat Q2 Sales, EPS Up ]

Hamada said the company would leverage the cuts toward improved operating income margins, and reinforced his commitment to long-term goals.

One bright spot in the company's strategy involves channel enablement in the cloud-computing sector, according to Jason Campagna, cloud practice director at St. Louis-based Worldwide Technology.

"Avnet specifically is doing a very good job with the cloud," Campagna told CRN. "The main value is that they are delivering fully baked offerings, and have a solid strategy and programs to support them. We're seeing a very significant uptake of distributors building solutions on top of cloud providers who don't have complete channel programs and complete channel models. And they're building those solutions in ways that can be consumed and sold at all levels of the market, from the SMB up to the enterprise."

No further details were given regarding the nature of the forthcoming cuts.


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